04 December 2009

Health insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.

In a third-quarter earnings conference call in late October, officials at Aetna announced that in an effort to improve on a less-than-anticipated profit margin in 2009, they would be raising prices on their consumers in 2010. The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

"The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering," said chairman and CEO Ron Williams. [...] Aetna's decision to downsize the number of clients in favor of higher premiums is, as one industry analyst told American Medical News, a "pretty candid" admission. It also reflects the major concerns offered by health care reform proponents and supporters of a public option for insurance coverage, who insist that the private health insurance industry is too consumed with the bottom line.

Note that it wasn't that Aetna wasn't already profitable under the lower fee structure. It just wasn't profitable enough to keep investors happy.

Ah, it's a pity Harry Reid is such a shitty Senate Majority Leader, because if he wasn't, we'd get a meaningful public health insurance plan and put these fuckers out of business. Or at least make them duke it out with a lean competitor.

14 comments:

Months ago when I was going apeshit to string these bastards up, and secure a future of healthcare security that did not involve for profit private companies beholden to their investors, you said all the cries for this were not needed and that the industry had merit, if only in it's embeddedness in the current system. Still glad to see you call em fuckers, when they are fuckers....

Typical liberal post: Ignore really basic facts in favor of a political agenda.

Not to go into a rant, but, at the very least, non-profits DO make profit or at least should, they just can't give it out in the form of dividends. It's not like your or my hospital is out there cutting costs to patients in lieu of expanding the ER or recruiting new doctors or buying a better MRI scanner (if they stayed in the dark ages, the place would certainly close).

Certainly, a non-profit has to provide SOME charity care, but...hi...if the insurance industry also provided a significant amount of charity care to subsidize insurance premiums, all they'd do is raise costs to everyone else, just like they do in a hospital to offset all our non-paying ER customers.

To me the most interesting quote in the HuffPo article came from the Barclay’s analyst (emphasis mine):

They were surprised by an acceleration in medical costs in 2009 which pressured their earnings. In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace.

It may well be that private insurance companies are not an appropriate way to deliver health care but that doesn’t mean those companies are handmaidens of Satan, run by vicious men who stay up late trying to make sick people suffer. Private companies have to make a profit and they have to make enough profit to encourage investors to buy their stock. Even non-profits - which I assume a government health plan or public option would be - have to make enough money to pay salaries and operating expenses. If the exchange plans or the public option are "surprised by an acceleration in medical costs" they are going to have to do exactly what Aetna is doing. Or, of course, they are going to have to cut benefits.

BTW, here’s all of what American Medical News actually said about Aetna’s conference call.

Non-profit does not mean that organizations have no surplus. A healthy organization is one in which a surplus is generated. In a nonprofit that surplus is used to either expand programing or incease one's endownment. Either way...it is good prcatice to have that equity..

But a health organization sending all of their profits to investors...

Lets see....decline health care to people...increase profits. So every time Aetna doesn't approve a procedure.....more money to investors!!!

I agree.... They are fuckers..and this is fucking sickening.

Most of the private insurance companies in my neck of the woods are non-profit. Some CEO may be getting a pretty penny...but at least the money is not going to some yak farmer in stupidland....(who owns stock)

Aetna is saying they received many more claims than expected due to what they think are physicians ordering more tests than usual (a trend which started as the economy slumped) and flu-related expenses. They did not raise premiums like other companies in 2009. They lost/lose business when employers cut jobs.

Something I read says 85% of premiums (up 5% from this time last year) go to paying for medical costs and the remaining 15% covers profit and cost to run the company including paying all its employees.

If you think that the 85% (the money paid to providers for billed services) isn't very flexible (other than doctors not jacking the company out of money), how do you think being non-profit would significantly affect the other 15%?

Shadowfax is right. Non-profits are there for the community and the margins they get go back into healthcare. You seldom see a non-profit exit a market unless they have been driven bankrupt. They are committed to the health of the community.

Wall street has no business in health insurance. Before the deregulation in the 1970s, all insurance was non-profit. Wall street demands quarterly growth. That can only happen by merging, acquiring or increasing revenues. How do you increase revenues? Simply change your medical loss ratio. You don't have to be a liberal to see that this system is really bad for the country.

Ah, it's a pity Harry Reid is such a shitty Senate Majority Leader, because if he wasn't, we'd get a meaningful public health insurance plan and put these fuckers out of business. Or at least make them duke it out with a lean competitor.

Yep, Harry Reid is pretty flippin' lame, ain't 'e?

It's interesting that your comments section has so many opposing viewpoints, unlike so many other medical blogs where the author is merely preaching to the choir and his or her sycophants merely suck them off in the comments section. Good for you.

Not to go into a rant, but, at the very least, non-profits DO make profit or at least should, they just can't give it out in the form of dividends. It's not like your or my hospital is out there cutting costs to patients in lieu of expanding the ER or recruiting new doctors or buying a better MRI scanner (if they stayed in the dark ages, the place would certainly close).

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Shadowfax

About me: I am an ER physician and administrator living in the Pacific Northwest. I live with my wife and four kids. Various other interests include Shorin-ryu karate, general aviation, Irish music, Apple computers, and progressive politics. My kids do their best to ensure that I have little time to pursue these hobbies.

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